Saturday, September 18, 2010

The Economist - September 18th-September 24th 2010 / Canada

The Economist is a global weekly magazine written for those who share an uncommon interest in being well and broadly informed. Each issue explores the close links between domestic and international issues, business, politics, finance, current affairs, science, technology and the arts.
In addition to regular weekly content, Special Reports are published approximately 20 times a year, spotlighting a specific country, industry, or hot-button topic. The Technology Quarterly, published 4 times a year, highlights and analyzes new technologies that will change the world we live in.

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10 Stocks That Hedge Funds Love Right Now

Goldman Sachs' latest Hedge Fund Trend Monitor shows the most heavily owned stocks in the U.S. as of August 20th.

A list of winners? Not exactly.

Most have done poorly year-to-date, and sometimes it's as if 'alternative investment managers' haven't gone beyond CNBC for their stock ideas. (more)

David Morgan: Play Silver, but Don't Get "Stuck"

The Gold Report: David, not only do you write The Morgan Report, but you've written books about silver, invested in silver as a teenager and you hold a substantial amount of physical silver. What's with your fascination with silver?

David Morgan: My fascination really started as a teenager, particularly with the stock market and money. Once I started researching money, I found out that a stable monetary base usually requires the backing of precious metals. But that was just the beginning. What really got me motivated about the silver market was the first bull market that I was involved in through the 1970s into 1980. I wasn't that big a silver bull at that time. I was more of a gold bull, but silver outperformed gold at the end of the market cycle so substantially that I started to study silver more diligently. I wanted to know why.

The Hunt brothers were big investors in the silver market throughout the 1970s. Everyone explained the silver boom with "it's the Hunts," but I wanted to know why the Hunts put that much money into silver. Why didn't they buy gold? What fascinated the Hunts about the silver market? Once I dug deeper, there were significant factors outside the Hunt brothers that made silver a compelling study. (more)

BNN: Top Picks

Benj Gallander, president, Contra The Heard Investment Letter, shares his top picks.

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Record Breaking Contango Suggests Higher Oil Prices for 2011

By Jason Simpkins, Managing Editor, Money Morning ConocoPhillips (NYSE: COP) is paying $41,000 a day to keep a storage tanker capable of holding 3 million barrels of oil floating in the Gulf of Mexico, according to international ship- and offshore broking firm RS Platou. And the TI Europe is just one of hundreds of oil tankers sitting idle in waters around the world, as energy companies and investment banks await higher prices for crude.

Oil prices have fallen precipitously since the spring, as optimism about "green shoots" of economic growth gave way to fears of a double-dip recession. Prices have fallen more than 12% to $75.81 a barrel, from a high of $86.54 a barrel in April.

Indeed, with the U.S. economy stuck in the mire, the global outlook for oil demand has diminished - at least in the near-term. Longer-term, however, traders expect prices to surge higher next year as growth solidifies. That's why contracts for crude set to be delivered six months from now are worth more than crude at its current prices - an anomaly known as "contango." (more)

The World Financial Report

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Chart of the Day

Robert Prechter: We're On The Verge Of The Biggest Bear Market In 300 Years

Robert Prechter at Elliott Wave International thinks we’re on the verge of the “biggest bear market in nearly 300 years”. Prechter, who believes the market moves in predictable waves, says the long-term pattern is one of dramatic upward trends with severe corrections inbetween.

He provides the following chart to show the very long-term trend in stock prices. Prechter believes the current downtrend is simply the beginning of a much more dramatic move that mirrors past market declines. Based on this data the market is well overdue for a sizable correction:

“Not even Major League Baseball can rival the stock market’s wealth of statistical data. And after studying the relevant data and analyzing the long-term pattern, Prechter offered this conclusion in the May issue of The Elliott Wave Theorist: “The current bear market will be the biggest in nearly 300 years.“

Yes, Britain’s “South Sea Bubble” in the early 1720s was the last time a bear market was comparable to what we may see unfolding now — it’s represented by that vertical drop which you see on the chart.”

Cheap Commodities Stocks

After weathering a lackluster grinding summer, commodities stocks are poised for a big rally. Thanks to an anomalous divergence between commodities prices and the general stock markets, commodities stocks are relatively cheap today. This has created an excellent buying opportunity for investors.

Commodities stocks, of course, are in the business of exploring for and producing raw materials. These resources are exceedingly important, indeed utterly indispensable for life and commerce. Even in this young Information Age, our entire physical world is built out of commodities. All physical movement is fueled by commodities. And despite new resource finds getting scarcer, world demand continues to grow relentlessly.

Commodities stocks’ profits are directly driven by commodities prices. The higher these resources’ prices travel, the greater the raw profits and margins for producing these products. And in the stock markets, the larger any company’s long-term profits the higher its stock price will be bid. So as the ironclad links of this causal chain show, it is commodities prices that ultimately drive commodities-stock prices. (more)

New Long-Term Buy Signal

Today another long-term buy signal was generated when the S&P 500 Index 50-EMA crossed up through the 200-EMA. Normally, we have high confidence in these signals, but, unfortunately, the long-term model has generated four, count 'em, four "long-term" signals in less than three months. On the chart below the red arrows mark the sell signals and the green arrows the buy signals. Prices have entered a trading range and, as you can see, they move just far enough in one direction to trigger a signal, then they reverse and go just far enough in the opposite direction to trigger the reverse signal.
This is not typical of how the model usually works, but any mechanical model will eventually run into rough patches where peculiar price movement defeats them. This is one of those times, and as long as the 50-EMA keeps making these shallow cuts back and forth, our confidence in the signals will not be robust. (more)

Foreclosure Tidal Wave

Bloomberg Businessweek - September, 9 2010

* How to fix the Economy.

* Companies. Pabst: Blue-Collar Beer, Jet-Set Owners.

* Etc. The end of the office romance?

* Finance. No, really, this must be the market bottom.

* Plus. Lisa Falcone: Mrs. Hedge Fund. Netflix vs. Cable.
Lessons from Nokia's fall. Where coke is definitely not it.
The chipotle man's next move.

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